Nobody could have predicted the vogue for GLP-1 drugs, which were originally designed to treat Type 2 diabetes. In recent times, these drugs have become hugely popular for weight loss purposes, boosted by social media and celebrity endorsements. In the United States alone, the number of patients starting GLP-1 treatments for non-diabetic purposes has increased by 700% since 2019, with estimates suggesting that over 220,000 patients started treatment each month in 2024.

Yet the soaring enthusiasm for so-called glucagon-like peptide-1 receptor agonists, first approved in 2005, overshadows an array of risks related to their off-label use. These include important environmental, social, and governance risks that investors must evaluate carefully given the landscape is rapidly evolving.

This article outlines examples of these issues, including:

  • Off-label marketing risk
  • Safety
  • Affordability

We also highlight how to screen GLP-1 drug companies. When combining insights from Morningstar Sustainalytics ESG Risk Ratings and Morningstar Equity Research (depicted in Exhibit 1), we find that Pfizer PFE and Roche RHHBY stand out as potential top choices among potential future market entrants, whereas Novo Nordisk NVO appears undervalued among current players.

GLP-1 drugs: Demand surges in a long-established market

The market for GLP-1 drugs is projected to reach $180 billion in 2034, according to Morningstar Equity Research. Current market leaders include Novo and Eli Lilly LLY, with treatments such as Ozempic, Wegovy, Mounjaro, and Zepbound addressing both diabetes and obesity.

Still, Novo and Lilly are unlikely to have this space to themselves for long. According to Morningstar Equity Research, several other players, including Pfizer, Roche, Amgen AMGN, AstraZeneca AZN, Zealand Pharma ZLDPF, and Structure Therapeutics GPCR are expected to join in, with multiple drug launches anticipated between 2027 and 2032.

Among these potential key players, Roche continues to stand out with multiple obesity candidates within its pipeline, all in phase II trials (as of November 2025), and it is expected to enter the market in 2029 or later.

Pfizer has decisively reentered the race to launch an obesity medication after those ambitions crumbled earlier this year. In April 2025, the company discontinued its main obesity candidate, danuglipron, due to safety concerns. However, through the $10 billion acquisition of clinical-stage biotech company Metsera in November 2025, Pfizer secured a next-generation obesity pipeline after an aggressive bidding war with Novo.

All that glitters is not gold: Issues and risks around GLP-1 medications

The effectiveness of GLP-1 medications in promoting weight loss has led to a surge in off-label demand, particularly for cosmetic purposes. Such usage introduces several ESG-related issues, both for patients and the companies marketing these drugs. An ESG approach allows more in-depth research into risks that aren’t captured by traditional financial analysis.

Off-label marketing risk

Manufacturers of GLP-1 medications may face regulatory scrutiny and legal risks if they promote their products for off-label use or disseminate inaccurate and misleading information. That raises substantial concerns for these companies and their investors. Such practices could trigger investigations into their promotional activities or legal action from consumers, sparking lengthy legal proceedings and operational disruptions. All these could pose significant financial burdens on the companies involved.

Safety concerns and liability issues

Like all pharmaceuticals, GLP-1 medications carry inherent safety challenges, including the risk of unanticipated adverse side effects. Chronic use of any medication can increase the likelihood of adverse side effects due to prolonged exposure. While patients living with chronic life-threatening conditions like Type 2 diabetes may accept these risks, people using GLP-1 drugs for less life-threatening and severe purposes like obesity may be less forgiving if the side effects outweigh the perceived benefits.

Consequently, people using GLP-1 medications for weight loss may litigate more readily over unanticipated or adverse side effects. This exposes manufacturers to potentially heightened liability risks, particularly in the US, where a litigious culture increases the risk and financial impact of legal challenges.

Sustainalytics’ dual-scoring Controversy research highlights how current market leaders Novo and Lilly are involved in a combined multi-district litigation over their GLP-1 drugs’ alleged link to gastrointestinal injuries, underscoring ongoing legal risks and associated impact safety risks.

Access, affordability, and pricing risks

Perceived excessive and unjustified price increases, as well as regional cost disparities, have sparked public debate and criticism over companies’ pricing strategies for their GLP-1 medications. That creates significant regulatory risks.

The current US presidential administration’s push for a most-favored-nation pricing model, effectively benchmarking US drug prices to international levels, has brought Novo and Lilly’s GLP-1 drugs under tighter pricing scrutiny. After a series of negotiations, the administration announced agreements with the two firms. They are set to offer the companies’ obesity drugs at discounted prices (around $350 per month, down from $500) for cash-paying customers on the TrumpRX direct-to-consumer platform in 2026 in exchange for Medicare coverage.

While such agreements may improve access for cash-paying customers and Medicare enrollees, they underscore the intensifying regulatory scrutiny, setting a precedent for future price controls and intervention. These pricing negotiations are part of a broader conversation surrounding the cost disparities between the US and other regions. Continued scrutiny of drug pricing appears likely, particularly given the rapidly evolving and uncertain US drug pricing environment, adding uncertainty for the companies set to enter the GLP-1 space.

At the same time, Medicare price negotiations under the Inflation Reduction Act finalized in November 2025. Earlier in the year, Novo’s semaglutide-based GLP-1 drugs (including Ozempic and Wegovy) were listed among the drugs subject to Medicare pricing negotiations, with the negotiated price dropping 71% for Medicare beneficiaries, set to take effect in 2027. The inclusion of GLP-1s in the negotiations reinforces the trend of heightened regulatory scrutiny, reduced pricing flexibility, and potentially growing pressures on long-term margins.

How to screen GLP-1 drug manufacturers

Which current and future GLP-1 manufacturers may be best-positioned to navigate these risks? One helpful tool is Sustainalytics’ ESG Risk Rating, which offers valuable insights into companies’ exposure to material ESG issues and evaluates their strategies to address such risks. By combining this information with Morningstar Equity Research’s fair value estimate, investors can identify opportunities that align with both their financial and ESG objectives.

Combining insights from the ESG Risk Rating and Morningstar Equity Research, we find that Roche and Pfizer stand out as potential top choices among the companies poised to enter the GLP-1 space. Both pair attractive valuations with strong management of ESG issues, positioning them well in the rapidly evolving obesity drug market.

Roche and Pfizer are each rated 4 stars by Morningstar Equity Research, signaling strong undervaluation relative to the current market prices. Both companies demonstrate strong overall ESG management, specifically in terms of product governance.

Still, Pfizer and Roche’s success here will depend on many factors, including the outcome of clinical trials, advancements in drug pipelines, the demonstrated efficacy and safety of their candidates, and effective strategies for commercialization and market access.

Meanwhile, among the current market leaders, Novo screens as the most attractive from a valuation and ESG risk perspective. Morningstar assigns Novo a 5-star rating, compared with 2 stars for rival Lilly. Both companies demonstrate strong ESG management, particularly for product governance. However, Novo outperforms Lilly on access to basic services.

For current market leaders, sustained dominance will hinge on an ability to navigate an increasingly uncertain regulatory and pricing environment and manage quality and safety concerns amid heightened scrutiny of GLP-1 drugs’ long-term effects and off-label use. Failure to address these challenges could erode competitive advantages and investor confidence, even as demand remains strong.

Looking to the future

As the GLP-1 market matures, ESG risks could decline. Beginning in 2026, GLP-1 prices are expected to fall 28%, according to Morningstar Equity Research, due to most-favored-nation pricing negotiations with the US. Further, as more companies enter the race starting in 2027, additional price declines are expected.

These potential price declines reflect heightened competition and regulatory pressures. In turn, these stresses might address concerns about access and affordability. Similarly, enhanced safety profiles for the next generation of GLP-1 drugs (such as potentially improved gastrointestinal tolerability) could lessen patient liability risks. Such developments will require investors to learn new ways to navigate the ESG risks for GLP-1 medications.

Get Morningstar insights in your inbox